Houses that sold in 2004, re-selling in 2006

[Steve Beebo]

These two houses are located in Pacific Ranch, a PUD development in Encinitas, off of Manchester Ave.

18xx Tennis Place sold 4-04 for $750,000, then re-sold 7-06 for $825,000, a 10% gain since 2004. That buyer did OK, and from looking at the two MLS listings, no major improvements were done in the 27 months.

On the other hand, 18xx Bel Air Terrace sold 7-04 for $879,000, had $50,000 in improvements during 2005 as per its’ listing, and is now on the market for $799,999, reduced from $820,000. That homeowner isn’t doing as well. They also borrowed 90%, ($791,000). So unless they have paid down the principle, they’ll be bringing a big check to closing.

[VCJIM]

I disagree; the first one did not do ok. They may not have lost much, if any, but I guarantee they didn’t gain. Think insurance, property taxes, etc.

[Steve Beebo]

They may not have gained much, if you figure that RE broker and other closing costs total 7% or more, but by doing OK I mean that to buy a house, then to resell it two years later without losing money is not too bad.

[Diego Mamani]

And, if they lived in the house, they saved about $50K in rent.

[Anonymous]

The first guy got out by the skin of his teeth and that seems to be what is happening in most closings… We really have not seen an abundance of sellers taking losses..

[PerryChase]

The second example you mentioned is about 14% drop from the top (including upgrades) if they get $799k in today’s “stable” market.

Thinking over the Professor’s prediction, I beleive that 25%-33% drop in the overall market is reasonable. But that would also mean 50% drop in many areas. I’m waiting to see how this turns out.

Diego, yeah they saved rent… but how much interest and property taxes and HOA did they pay? I would think more than rent for a similar property.

I might also ad that people also go crazy and buy all kinds of furniture and stuff for their houses, stuff that becomes garbage when they sell. I completed re-did my house from furniture I purchased from craigslist. I’m very patient and and only buy at give-away prices but I’ve gotten some super deals. Of course you have to be VERY patient and buy only want you need or really want.

[VCJIM]

I’m with you on this one Perry. He covered his costs, that is about it. At the early stages of his loan (or an IO), he would have been paying mostly, or all interest. Nice for a tax reduction but not on earning equity.

[Anonymous]

Steve B., what’s the data source for the $791K mortgage? Does that data source also reveal the loan type (e.g., 5/1 ARM) or interest rate?

[powayseller]

Steve Beebo – very interesting. Thanks so much for sharing that. To what do you attribute Seller #1 selling for more in 2006?

[(former)FormerSanDiegan]

I ran the numbers …

Assuming 750K purchase, 20% down, 5.5% I/O Loan.

Monthly outlays assumed:
interest = 2750
Taxes = 687/mo
HOA/other (mello roos) = 300
Insurance = 150
Total monthly = 3937

26 months total = 102363

In 35% combined fed/state bracket there is a tax savings of
about 31K over the 26 months.

AFTER Tax outlay ~ 71K.

Grosssale (assume 7% commission and costs) = 0.93*825K = 767,250

Profit from sale = 17,250

After tax outlay minus profit = ~ 54K = 2076 per month for 26 months to live in the home.

Market rental rate ~ 4% of value = 2500 per month.

Monthly savings by owning in this example : about $400

Opportunity cost of tying up downpayment of $150K, assuming 4% average return = $500 per month.

Looks like a net loss to me.

[Steve Beebo]

JG -the data source for the mortgages is from Sandicor / MLS through their tax records, or it can be found on other public records that appraisers pay for by the month, like NDC Data or Metroscan. I don’t think you can find out what type of loan it was, however.

Powayseller – Property #1 sold 4-04, and Property #2 sold 7-04, so the three month time difference may have been important at that time, since that is around when inventory was at its’ lowest. The second buyer also appears to have been the high bidder in a multiple offer situation, which probably pushed the sale price up. In general, it seems that properties that sold in 2004 and have resold this year are still selling at higher prices now, usually 5-15% or more. Properties that sold in 2005 are usually the only ones that have had any dollar decline to the present. It’s rare, (to this point), to see a SFR bought in 2004 that has declined as much as this one.

[lamoneyguy]

Good analysis FSD, and demonstrates why the nominal increases that the real estate industry continues to champion is meaningless. Imagin, this guy “made” $75k in two years, but really lost money, or at best broke even. How well would you have done if you only “made” $40k?

[bmarum]

The loan on the first mortgage for the Bel Air Terrace property was an adjustable rate loan. I couldn’t find out any more detail on it, i.e. whether it was a 3, 5, 7 or 10 year ARM or whether it was an I/O, etc. I would assume the second mortgage they took out was also an adjustable rate loan, but the database I searched doesn’t say.

[PD]

There are two houses in my area that sold last year and are newly up for sale again. I’m wondering if they are in trouble. Does anyone have info on these houses?
1X Admiralty Cross, 92118
3X Green Turtle Road, 92118

[bmarum]

1X Admiralty Cross: As near as I can tell, this property has a mortgage of about $1.439 million, which means they put about $360k down when they bought it for $1.8 last year. It’s now listed at $2.2 million.

3X Green Turtle: the LLC that bought this in 2005 paid cash for it.

[Author]

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